The family of a British cameraman shot dead by Israeli troops in Gaza five years ago said yesterday they may accept a compensation offer of £1.8m despite their grave concerns that the move was a "ruse" to delay a civil action over the shooting.

James Miller was killed while filming a documentary in Rafah, near the border with Egypt. The journalist who accompanied him, Abdurahman Abdallah, said he was shot as he tried to leave a house while holding a white flag.

A British inquiry, based on a video of the incident, said Miller was shot in the neck by an Israeli army patrol. Miller's family is due to begin a civil action in the Israeli courts next month to decide culpability.

"We have grave concerns that the suggestion from the Israelis that a settlement has been reached is merely a ruse to allow the Israeli defence submission to be delayed. They have asked for an extension," the family said in a public statement.

"Based on our experience with the Israeli authorities over the past five years and the fact that the action will take place in an Israeli court - albeit a civil one - we do not have a great deal of confidence in a fair or just outcome," it said.

Previous attempts at out-of-court settlements failed because Israel had either "reneged" or "renegotiated to our detriment", the family said. However, they indicated that they may accept the new offer. "Having had an exhausting and expensive five-year fight, the possibility of an out-of-court settlement might be considered, although no agreement has been reached," the statement said.

Israel's foreign ministry said negotiations were continuing with the Miller family but would not confirm the amount of the proposed compensation. "We hope to be able to conclude these negotiations in the near future," the ministry's spokesman, Arye Mekel said. He rejected claims that the deal set a precedent.

Israeli officials told the daily paper Ha'aretz that the legal aspects of the case "had been settled" as part of the deal. In return, the British government will end its action to extradite the Israeli soldiers for trial in the UK, according to Ha'aretz.

The breakthrough came following negotiations between Israel's foreign minister, Tzipi Livni, and the British government.

The British embassy in Tel Aviv said: "We want a resolution as fast as possible," but added its role was limited as the negotiations were between the family and Israel's legal advisers. At the time of Miller's death, the army suggested he was killed by Palestinians. However, ballistic tests ordered by the family showed he was killed by the army. He was carrying a white flag illuminated by a torch, and other members of the group shouted that they were British journalists.

When Israel investigated the incident in March 2005 it concluded there was insufficient evidence to press criminal charges. The commander of the unit faced disciplinary proceedings but was exonerated.